Standard Chartered is reportedly weighing a restructuring of its digital asset business that could bring parts of its majority-owned crypto custody arm, Zodia Custody, more closely into the bank’s existing operations.
The potential deal, initially reported by Bloomberg, marks the point at which traditional banks are starting to tighten up their approach to cryptocurrencies and develop new strategies for operating in this field.
As informed insiders claim, the idea is to merge duplicate custody functions performed by Standard Chartered and Zodia, mostly to increase efficiency and avoid unnecessary redundancy.
However, Zodia will remain an independent company offering its crypto custody solutions to institutional customers via the software-as-a-service approach. So, the main goal is not about shrinking but rather optimizing the internal processes so that the business can scale further.
These negotiations are evidence of a broader trend in the banking industry, where players who ventured into cryptocurrency earlier are reviewing their strategies regarding their digital asset divisions.
Cryptocurrency custody services, leveraging the blockchain, offer a compelling and effective way for investment firms to protect digital assets. However, as these firms grow, they may face significant operational costs and hurdles stemming from the simultaneous execution of similar functions.
Accordingly, by integrating some activities, financial institutions would be able to strengthen their risk management procedures, improve their compliance processes, and comply with regulations better.
Standard Chartered launched Zodia Custody with Northern Trust
Zodia Custody was established by Standard Chartered in conjunction with Northern Trust towards the end of 2020, during a period when there had been an uptick in the demand from institutional players for more reliable digital infrastructure. This collaborative effort sought to offer custodial services designed to meet the needs of financial institutions.
The company has since gained support from various banks and financial firms, such as Emirates NBD, National Australia Bank, and SBI Holdings. These collaborations further strengthened the reliability of the firm and showed a growing interest in digital assets from traditional finance.
So far, it is not certain if any of the investors holding small stakes in the company have had any involvement in the proposed restructuring talks. Nonetheless, according to the source cited in the article, there are high chances that an official announcement regarding this development may be made this month itself.
Zodia Custody expands across global financial hubs amid rising institutional crypto demand
Regardless of all the possibilities for restructuring, Zodia Custody has kept growing steadily. Today, it serves several financial hubs around the world, such as London, Singapore, and Hong Kong. This reflects the increasing demand for institutional crypto products on the global market.
This growth has also been facilitated by Zodia’s cooperation with Galaxy Digital, which allowed providing institutional staking services in Europe. When the two companies joined forces, the staked assets of Galaxy amounted to about $4.2 billion worth of digital currencies.
Thus, it is safe to conclude that the possibility of restructuring means that the organization may be going through a period of consolidation, rather than scaling down. Neither do financial institutions like Standard Chartered give up on digital assets, but rather try to optimize their operations.